Technology Adoption with Multiple Alternative Designs and the Option to Wait

22 Pages Posted: 13 Oct 2008 Last revised: 25 Feb 2015

See all articles by Luis M. B. Cabral

Luis M. B. Cabral

New York University (NYU) - Leonard N. Stern School of Business - Department of Economics; Centre for Economic Policy Research (CEPR)

Cristian L. Dezso

University of Maryland - R.H. Smith School of Business

Date Written: July 2004

Abstract

Frequently, new technologies arise under two or more alternative designs. Moreover, the state of each design evolves over time as a result of various cumulative improvements. In this paper, we study the strategic interaction between \incumbent" firms (those who already own a design) and \entrants" (those who do not but would like to adopt thenew technology). We focus on two important decisions by an entrant: when to choose a design and which design to choose. We show that, in equilibrium, an entrant chooses the leading design and does not wait. While the former decision is efficient, the latter is generally not: the incumbent firms' inability to commit to future prices leads to inefficiently early technology adoption.

Keywords: technology standards, alliances

Suggested Citation

Cabral, Luis M. B. and Dezso, Cristian L., Technology Adoption with Multiple Alternative Designs and the Option to Wait (July 2004). NYU Working Paper No. 2451/26131; Robert H. Smith School Research Paper No. RHS 06-102. Available at SSRN: https://ssrn.com/abstract=1282560

Luis M. B. Cabral (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-0858 (Phone)
212-998-4218 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~lcabral

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Cristian L. Dezso

University of Maryland - R.H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742
United States
301-405-7832 (Phone)

HOME PAGE: http://www.rhsmith.umd.edu/lbpp/faculty/deszo.html

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
32
Abstract Views
501
PlumX Metrics